Ford Sees $1 Billion Payoff From Truck Plant Transformation

Ford Motor Co. (IW 500/3) predicted an earnings boon from converting just one car plant to make trucks and sport utility vehicles. And the automaker said that the factory is just the first of many that will pump out more profit.

In 2021, Ford will reap $1 billion more in earnings before interest and taxes than it did two years ago from its Michigan Assembly Plant, which just started producing Ranger pickups and will begin building Bronco SUVs next year. The factory in Wayne, a Detroit suburb, used to make Focus compact cars and C-Max hybrids.

“We have a number of examples that will actually be material improvements to the business,” Jim Baumbick, vice president of enterprise product-line management, said at an investor presentation Wednesday. “We have a couple of examples like that where we’re making major changes in the overall profit contribution.”

Ford is shifting its spending to high-profit pickups and SUVs as it exits the traditional sedan business in the U.S. Between 2019 and 2023, Ford will devote 91% of its capital expenditures to developing and building trucks and SUVs, Baumbick said. That compares with 64 percent of spending devoted to those vehicle types from 2016 to 2020.

Ford shares rose 1.5% to $9.50 at 12:45 p.m. on April 17 in New York. The shares are up 24% this year, after falling 39% last year amid skepticism about the company’s $11 billion restructuring plan.

At a conference Bank of America Merrill Lynch is hosting alongside this week’s New York auto show, Baumbick also said Ford has a new entry-level vehicle coming in 2022 that was conceived and approved in just 12 weeks, which he said demonstrated the automaker is moving faster to get new models to market.

A sporty electric vehicle inspired by the company’s Mustang pony car will be profitable “out of the gates” when it launches next year, Baumbick said. The revived Bronco SUV also will generate several spinoffs that should add to the automaker’s earnings, he said.